The Rising Economic Power: Is China Set to Overtake the U.S.?

The ongoing economic rivalry between the United States and China is intensifying, with China poised to potentially surpass the U.S. as the world's largest economy. This article delves into the historical context, current strategies, and future implications of this shift in global power dynamics. As China continues to grow and innovate, the U.S. faces challenges in maintaining its dominance. What does this mean for the future of international relations and economic stability? Read on to discover the unfolding narrative of this critical global contest.

By Narendra Chaudhary May 18, 2025, 08:29 IST

The Clash of Titans: America vs. China

Historian Max Hastings characterized World War II as a monumental struggle between two colossal forces: Adolf Hitler's Nazi regime and Joseph Stalin's Soviet Union. Other events, such as Winston Churchill's speeches and the American conflict with Japan, were merely secondary to this primary confrontation, as evidenced by the nationalities of those who perished.

Today, a similar rivalry exists between two dominant nations: the United States under Donald Trump and China led by Xi Jinping. While this contest is not yet military in nature, the stakes are comparably high. From an external perspective, it appears to be a battle for global economic supremacy between the West and Asia. Typically, one might expect support for an Asian power against Western interests, but experiences suggest that many in the region feel insecure and small-minded.

China's primary requirement is time. Back in 1991, when India embarked on its liberalization journey, its economic standing was on par with China's. Although China had begun reforms a decade earlier, it started from a significantly lower economic base compared to India, having been largely isolated from the global market for years. In contrast, India's leadership had not subjected its populace to the same level of hardship that China had endured.

Over the past 35 years, China has achieved an impressive average GDP growth rate of 9%, a record unmatched by any Western nation. However, in the last decade, this growth has decelerated to an average of 5.8%, which is comparable to India's growth but from a much larger economic foundation.

If China is granted another decade of uninterrupted growth, it is poised to surpass the United States as the world's largest economy. While it has already achieved this status in terms of Purchasing Power Parity, it is likely to do so in absolute terms within the next ten years. The prospect of the U.S. being relegated to second place in a world that China has influenced for 150 years is unacceptable to American leaders. Scholars like John Mearsheimer argue that this rise will inevitably lead to conflict, a phenomenon known as the Thucydides Trap, which posits that a rising power displacing a dominant one often results in war. This perspective suggests that the U.S. will not accept a subordinate role and will take measures to suppress its rival.

Conversely, some theorists contend that this viewpoint is overly Western-centric, asserting that Asian nations, including China, may not engage in global affairs as aggressively as the West has historically done. They argue that China's ascent may not pose a direct threat to U.S. military bases or its control over international institutions like the IMF and the United Nations Security Council. However, like the Thucydides Trap, this is speculative, and the true nature of China's actions upon surpassing the U.S. remains uncertain.

For the past eight years, the U.S. has attempted to hinder China's economic growth by restricting access to advanced semiconductor technology and imposing tariffs on Chinese goods, often citing issues like the opioid crisis as justification. Despite these efforts, the U.S. has struggled to isolate China economically, as evidenced by the stock and bond markets' reactions to Trump's policies.

China has effectively gained time to strategize. The focus of the Trump administration has shifted from trade to tax reforms, which will dominate its agenda leading up to the mid-term elections in 2026. This shift may reduce the likelihood of aggressive trade policies, further benefiting China. Given the setbacks of Trump's trade strategies, it is plausible that his successor may adopt a different approach post-2028.

In preparation for a trade conflict, China has taken steps to allow struggling real estate firms to fail, redirecting capital towards industrial growth. Additionally, it has sought to diversify its export markets beyond the U.S. and strengthen its supply chains through partnerships in Africa and Latin America.

Currently, the U.S. ranks as China's third-largest trading partner, following the Association of Southeast Asian Nations and the European Union. Moreover, China has accelerated advancements in various cutting-edge technologies, diminishing the leverage that the U.S. once held over it.

If current trends persist, the world may witness a historic shift, with the largest economic power no longer being Western but Asian. This transformation will have far-reaching implications for all nations, yet no government, including that of the U.S., has adequately prepared its citizens for this impending change.